3 Silly Abuses Obama’s Patent Troll Executive Order Could Stop

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Allowing for the legal ownership of ideas has some silly unintended consequences. “Dumbass patents are crushing small businesses,” Dallas Mavericks owner Mark Cuban once told me. Roughly a third of startups have been threatened with patent violations, often by entities built solely to scare small businesses into settling (so-called “patent troll”). President Obama has decided to go after the universally loathed business entity with a few very specific executive orders this morning.

After a bit of background, we list three ways it’ll help stop silly legal abuses.

A History Of Patent Hoarding

Trolls, or their more diplomatic legal title, Patent Assertion Entities (PAE), are typically shell organizations with no other interests but to hoard intellectual property and frighten fragile small businesses into legal settlements.

“They don’t actually produce anything themselves. They’re just trying to essentially leverage and hijack someone else’s idea to see if they can extort some money out of them,” admitted President Obama in a Google+ hangout earlier this year.

A Santa Clara University study estimates that patent trolls clog courts logs with an estimated 61 percent of all patent litigations. Seventy-six percent of those who brought a suit had sued at least 15 other organizations. In other words, these are lawsuit machines.

Intellectual property hoarding is a time-honored tradition claimed by many of America’s great innovators. The Wright brothers threatened to sue anyone who commercialized a plane with an aileron (the little flaps on wings that extend up during landing). “It was not until the government stepped in in 1917 and required the Wrights to license their patents that airplane innovation really took off,” writes Stanford Law Professor Mark Lemley.

So, government interventions in aggressive patent hoarding is as American as apple pie.

3 Attempts At Stopping Silly Abuses

1. Narrowing Functional Claiming – The most brazen organization claim ownership over some crazy-broad innovation. Amazon famously tried to patent the “one-click-to-buy” button. One patent troll, Acacia Research, claimed ownership of sending medical images over the Internet. Obama’s executive order attempts “to limit inventions to a specific way of accomplishing a task, as opposed to all ways of accomplishing a task,” explained the Electronic Frontier Foundation in a blog post about the executive order.

“I’m very pleased to see the White House focus on functional claiming of software, which I think is responsible for many of the overbroad assertions by patent trolls,” Lemley told me in an email.

2. Targeting End Users – Sometimes it’s easier for a patent troll to blind-side a business for simply using a product that they claim ownership of. For instance, Lodsys went on a lawsuit rampage threatening app developers who allowed users to “click to upgrade” — a feature that Apple and Google provide.

Apple rightly intervened to protect its users, and the case is still in court.

3. Disclosing Owners – Patent trolls like to duck scrutiny with a legal bob and weave technique that hides who actually owns the intellectual property. Intellectual Ventures, for instance, has 1,000 shell companies asserting patent rights, and has admitted the tactic is to avoid judicial review. Obama’s executive order requires “patent owners to update records at the Patent Office with the patent’s real owner.”

Extra Steps – Maybe Not Enough

Obama can’t declare the United States out of the patent mess and needs legislation to help. Specifically, he’s supporting “loser pays,” which would force patent trolls to pay up if they lose in court. Earlier this year, the Saving High-Tech Innovators from Egregious Legal Disputes (SHIELD) Act proposed this very solution.

For free information hawks, the order doesn’t go nearly far enough. Many, like Mark Cuban, want to see software patents almost entirely eliminated. There will always be legal loopholes that clever trolls exploit. MIT’s Eric von Hippel found patents provide very little value to inventions that don’t require a lot of money to design (like a new drug or iPhone).

Whatever your believe, the executive order seems like a step in the right direction.